What Ending Health Subsidies Means

If the Supreme Court rules that no federal tax credit subsidies can be provided to Americans buying insurance on federal health exchanges in 34 states, the economic effects could be devastating.

Some 7.5 million people who qualified for subsidies this year could have them yanked away after a court decision, and more than nine million people would be unable to get subsidies in 2016.

State economies would suffer, insurance markets would be disrupted, millions of people would lose coverage, hospitals and insurance plans that have counted on revenues from newly insured people would be left high and dry, and people who continue to hold policies would pay a lot more for them. The health care markets in which individuals and families buy their own policies — on the exchanges and outside them — would fall into chaos.

With subsidies no longer available, the younger, healthier and less costly people to insure would decide to go without insurance, and insurers would be forced to jack up their premiums for the remaining people, likely sicker and requiring more health care. That would trigger a so-called death spiral that would cause more people to drop out and rates to rise even higher, making things worse than they were before the reform law was enacted.

Those who can pay for insurance would face much higher premiums, as high as 47 percent more on average, according to a RAND Corporation analysis, and would most likely have a smaller choice of plans and networks of doctors and hospitals.

Important segments of the health care system would be gravely damaged. As Stuart Butler, a leading conservative analyst, has noted, hospitals and insurance companies redesigned their business models to meet the needs and incentives of the Affordable Care Act on the assumption that they would be getting hordes of new patients who were once previously uninsured.

Hospitals that hired lots of health care workers to meet the anticipated demand would presumably have to lay them off. Insurers that set their rates on the assumption of high volume would have to recalibrate them and might leave the market. Trade groups for both hospitals and insurers have urged the Supreme Court to retain the subsidies.

State economies would suffer with the disappearance of the huge federal subsidies that help insure people; state governments would see reduced tax revenues when health care providers and insurers lose business. The two hardest-hit states would be Florida, where the subsidies bring in about $400 million a month, and Texas, which rakes in about $200 million a month, according to a senior economist at the RAND Corporation. That translates over the course of a year into billions of dollars in those two populous states.

In all 34 states combined, the Urban Institute estimates, health care spending in 2016 on behalf of those losing coverage would plummet from a projected $27.1 billion to $17.4 billion, leading to a loss of $112 billion over 10 years.

With people thrown off insurance, the states and their hard-pressed hospitals and doctors would also have to absorb much of the cost of uncompensated care. The Hospital Corporation of America, a gigantic health care system, estimates that uninsured patients are three times more likely than insured patients to use its emergency rooms, which are far more costly than outpatient clinics.

The Obama administration has said that it has no backup plan to cope with the loss of subsidies. The congressional Republicans who want to destroy Obamacare offer no meaningful plans to deal with the consequences.

Beyond economic damage, the lack of insurance almost always means that sick people get less care, with greater risk of death. The leading professional societies that battle cancer, diabetes, heart disease, stroke and multiple sclerosis, in a brief to the court, cited extensive evidence that patients with adequate insurance are more likely to have their diseases managed or cured at an early stage, while uninsured patients tend to seek help only when the disease is advanced and treatment is ineffective and costly.

For instance, among patients with diabetes, 42 percent who lacked health insurance were undiagnosed compared with 26 percent for those with insurance, according to a 2008 study. A study using 2011-12 data put the numbers at 32 percent and 15 percent. The American Public Health Association and faculty members at schools of public health warned the court that ending the subsidies would result in more than 9,800 additional deaths a year.

The political opponents of Obamacare seem to think this fight is about ideology. What they refuse to acknowledge is the human toll and the economic devastation that destroying the heart of health reform will bring about.

A version of this article appears in print on , on Page SR10 of the New York edition with the headline: What Ending Health Subsidies Means. Order Reprints | Today’s Paper | Subscribe